EXHIBIT 10.2
CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT
THIS
CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT (this
“Agreement”) is made and entered into as of this 18th
day of July, 2007 (the “Effective Date”) by and between
Frederick J. Hirt (the “Executive”), and Arrow
International, Inc., a Pennsylvania corporation, having its
principal offices at 2400 Bernville Road, Reading, Pennsylvania
19605 (the “Company”).
WITNESSETH:
WHEREAS,
the Executive has extensive experience in the business and affairs
of the Company and is a valuable member of the management team;
and
WHEREAS,
the Board of Directors of Arrow International, Inc.(the
“Board”) has determined that it is appropriate to
reinforce the continued attention of certain key management
employees, including the Executive, to their assigned duties
without distraction upon a change in control of the Company;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. TERM OF AGREEMENT . This Agreement shall
expire on the first anniversary of the date on which a Change in
Control (as defined herein) occurs (the “Term”).
2. CHANGE IN CONTROL . No benefits shall be
payable hereunder unless there shall have been a Change in Control
(as defined below) of the Company. For purposes of this Agreement,
a “Change in Control” shall mean the occurrence of any
of the following events after the date of this Agreement:
(a) the
acquisition after the Effective Date by an individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the “Exchange
Act”)) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than
30% of the combined voting power of the voting securities of the
Company entitled to vote generally in the election of directors
(the “Voting Securities”); provided, however, that the
following acquisitions shall not constitute a Change in Control:
(a) any acquisition, directly or indirectly by or from the
Company or any subsidiary of the Company, or by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any subsidiary of the Company, (b) any acquisition
by any underwriter in connection with any firm commitment
underwriting of securities to be issued by the Company, or
(c) any acquisition by any corporation if, immediately
following such acquisition, 70% or more of the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
(entitled to vote generally in the election of directors), are
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who, immediately prior to such
acquisition, were the beneficial owners of the then outstanding
common stock of the Company (“Common Stock”)
and the
Voting Securities in substantially the same proportions,
respectively, as their ownership, immediately prior to such
acquisition, of the Common Stock and Voting Securities; or
(b) The
occurrence after the Effective Date of a reorganization, merger or
consolidation, other than a reorganization, merger or consolidation
with respect to which all or substantially all of the individuals
and entities who were the beneficial owners, immediately prior to
such reorganization, merger or consolidation, of the Common Stock
and Voting Securities, beneficially own, directly or indirectly,
immediately after such reorganization, merger or consolidation, 70%
or more of the then outstanding common stock and voting securities
(entitled to vote generally in the election of directors) of the
corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization,
merger or consolidation, of the Common Stock and Voting Securities;
or
(c) The
occurrence after the Effective Date of (a) a complete
liquidation or substantial dissolution of the Company, or
(b) the sale or other disposition of all or substantially all
of the assets of the Company, in each case other than to a
subsidiary, wholly-owned, directly or indirectly, by the Company or
to a holding company of which the Company is a direct or indirect
wholly owned subsidiary prior to such transaction; or
(d) During
any period of twelve (12) consecutive months commencing upon
the Effective Date, the individuals at the beginning of any such
period who constitute the Board and any new director (other than a
director designated by a person or entity who has entered into an
agreement with the Company or other person or entity to effect a
transaction described in Sections 2(a), 2(b) or 2(c) above)
whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least a
majority of the directors then still in office who either were
directors at the beginning of any such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board.
Notwithstanding the above, a “Change in Control” shall
not include any event, circumstance or transaction which results
from the action of any entity or group which includes, is
affiliated with or is wholly or partially controlled by one or more
executive officers of the Company and in which the Executive
participates
3. CHANGE IN CONTROL BENEFITS .
Provided that the Executive (a) is employed by the Company on
the date of a Change in Control, (b) terminated his employment
for Good Reason (as defined below) within 180 days prior to
the date on which a Change in Control occurs, or (c) was
terminated by the Company for other than Cause (as defined below)
within 180 days prior to the date on which a Change in Control
occurs, the Executive will become fully vested in all outstanding,
unvested stock options granted to the Executive by the Company (the
“Options”). The Company represents and warrants that no
Agreement or Plan Document prevents said vesting and the Company
agrees to take any action necessary to provide the benefits
provided in this Agreement.
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4. CHANGE IN CONTROL RETENTION BONUS .
Provided that the Executive (a) is employed by the Company on
the date of a Change in Control, (b) terminated his employment
for Good Reason within 180 days prior to the date on which a
Change in Control occurs, or (c) was terminated by the Company
for other than Cause within 180 days prior to the date on
which a Change in Control occurs, then as soon as administratively
feasible after the date of the Change in Control, the Executive
shall receive a lump sum payment equal to one (1) times the
annual base salary the Executive received from the Company as of
the Effective Date. Additionally, provided that the Executive (a)
is employed by the Company on the date of a Change in Control,
(b) terminated his employment for Good Reason within
180 days prior to the date on which a Change in Control
occurs, or (c) was terminated by the Company for other than
Cause within 180 days prior to the date on which a Change in
Control occurs, then upon any termination of the Executive’s
employment (the “Termination Date”), the Executive and
the Executive’s spouse will receive continuation of medical
benefits in effect as of the Termination Date (or such benefits as
the Company or its successor may subsequently provide from time to
time to the senior executives of the Company) at the
Company’s (or its successor’s) sole expense until the
earliest of (i) December 31, 2012, (ii) the date on
which the Executive becomes eligible for medical benefits under a
group health plan of any employer or (iii) the date on which
the Executive dies. Additionally, solely with respect to
continuation of medical benefits for the Executive’s spouse,
such coverage shall immediately cease on the date on which the
Executive’s spouse attains age 65, if earlier than any date
so provided in the foregoing sentence. Any claims for reimbursement
of a proper medical expense shall be paid as soon as
administratively feasible following the proper submission of such
expense; provided however, that all such claims must be submitted
and paid by the end of the year following the year in which such
expense is incurred.
5. CHANGE IN CONTROL SEVERANCE . If within the
twelve (12) months following a Change in Control but on or
before October 1, 2008 (a) the Executive terminates his
employment with the Company for any reason or (b) the Company
terminates the Executive’s employment with the Company
without Cause, then subject to the terms of this Agreement, and
contingent upon execution and effectiveness of the general release
attached hereto as Exhibit A, the Company shall pay to the
Executive the following benefits:
(a)
Severance Pay . Equal payments of $25,416 (each, a
“Severance Payment”) paid on a monthly basis,
commencing with the first day of the month following the
Termination Date and ending with the payment to be made on
October 1, 2008. Notwithstanding the foregoing, if the
Executive is employed by any entity or person (other than
self-employment or employment for an entity in which the Executive
owns more than 50% of the voting interests in such entity) (a
“Subsequent Employer”), then the Severance Payment made
on the first of a month shall be reduced on a dollar for dollar
basis for all compensation paid by the Subsequent Employer to the
Executive in the month prior to the month in which the Severance
Payment is made.
(b)
Specified Employee Delay . Notwithstanding anything herein
to the contrary, if any payments due under this Agreement would
subject Executive to any tax imposed under Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”)
if such
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payments
were made at the time otherwise provided herein due to the
Executive being a “specified employee” (as such term is
defined in Code Section 409A(a)(2)(B)(i)) of a publicly traded
company on the Termination Date, then such payments that would
otherwise cause such taxation shall be payable in a single lump sum
on the first day which is at least six months after the date of the
Executive’s “separation of service” as set forth
in Code Section 409A and any remaining payments will be made
monthly thereafter.
(c)
Restrictive Covenants . Additionally, the payments and
benefits contained in Section 5(a) shall be contingent upon the
Executive’s compliance with the restrictive covenants
contained in this Agreement.
(d)
Code Section 280G Cutback . The Severance Payments to
be provided to the Executive hereunder and all other payments or
benefits which are “parachute payments” (as defined in
Section 280(G)(b)(2)(A) of the Code) payable to the Executive under
other arrangements or agreements (the “Total Payments”)
shall be adjusted as set forth in the following sentence. If the
Total Payments as a result of any Change in Control would (in the
aggregate) result in an amount not being deductible under Code
Section 280G or an excise tax under Section 4999, the
Total Payments shall be reduced to the extent necessary so that the
deductibility of the full amount of such reduced Total Payments is
not limited by Code Section 280G or such Total Payment is not
subject to an excise tax under Section 4999.
(e)
Cause . The Company shall have the right to terminate
Executive’s employment for “Cause” upon:
(i) the Executive’s conviction of or plea of guilty or
nolo contendere to a felony; (ii) the Executive’s gross
negligence or willful misconduct in the performing of his duties
that harms the Company; (iii) the Executive’s failure to
comply with this Agreement or the Executive’s repeated
failure, after written notice thereof, to carry out his lawful
duties and responsibilities, which repeated failure results in harm
to the Company; or (iv) the Executive’s commission of
fraud, theft against or embezzlement from the Company.
(f)
Good Reason . The Executive shall have the right to
terminate his employment for “Good Reason” if:
(i) the Executive’s base salary is reduced or
(ii) the Executive’s primary office location is
relocated to a place that increases the distance from
Executive’s home (as of the Effective Date of this Agreement)
to such new location, by more than 40 miles; or (iii) the
duties of the Executive on the date hereof are substantially
reduced after the Change in Control; provided however, that no such
reduction shall constitute Good Reason if after any such reduction,
the Executive has or is assigned duties commensurate with those of
any individual having the title of “Director” or above
on and prior to the Change in Control.
6. CONFIDENTIAL INFORMATION AND
NON-DISPARAGEMENT .
(a)
Confidential Information . The Executive shall not, without
the prior express written consent of the Company, directly or
indirectly divulge, disclose or make available or accessible any
Confidential Information (as defined below) to any person, firm,
partnership, corporation, trust or any other entity or third party
(other than when required to do
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so by a
lawful order of a court of
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